GSI Group Reports Second Quarter Results
BEDFORD, MA July 31, 2008: GSI Group Inc., (Nasdaq: GSIG), a supplier of
precision technology and semiconductor systems, today announced financial
results for the second quarter ended June 27, 2008.
Second quarter revenue was $66.0 million, compared to $71.7 million in the first
quarter of 2008 and $73.1 million for the second quarter of 2007. Excluding
restructuring charges, operating profit was $1.6 million in the second quarter
versus $1.5 million in the first quarter and $5.4 million in the second quarter
of 2007. GAAP net income for the quarter was $1.1 million, or $0.03 per diluted
share, compared to the first quarter results of $2.1 million, or $0.05 per
diluted share, and $3.3 million, or $0.08 per diluted share in the second
quarter of 2007.
Second quarter bookings were $51.2 million, compared to $56.1 million in the
first quarter of 2008. The book-to-bill ratio was 0.78.
The backlog as of June 27, 2008 was $60.0 million, compared with $74.8 million
in the first quarter of 2008. The backlog as of June 27, 2008 includes deferred
revenue of $10.6 million.
Dr. Sergio Edelstein, President and CEO commented, "Although GSI's overall
slower business levels mirror the current state of the semiconductor industry,
our laser, scanner and encoder product lines continue to perform well. I am
particularly pleased with the market's increasing acceptance of our new
Lightning Scanners, JK and Fiber Lasers, and Mercury II Encoders."
"In addition, we have recently announced the execution of a definitve agreement
to acquire Excel Technology," Dr. Edelstein continued. "This transaction will
nearly double the revenues from our Precision Technology segment. Going forward,
we expect the Precision Technology segment of our business will approach 80% of
GSI's total revenue, and will expand our presence in several of our most
attractive target markets."
Gross margin was 38.5% in the second quarter, versus 38.1% in the first quarter
of 2008. Operating expenses, excluding restructuring charges, were $23.8 million
in the second quarter compared to $25.9 million in the first quarter. Stock
based compensation was $0.7 million in the second quarter versus $0.8 million in
the first quarter of 2008.
Cash and cash equivalents were $183.3 million, an increase of $12.6 million from
the first quarter. Second quarter cash usage includes disbursements of $3.3
million in connection with the Company's previously announced stock buyback
program.
GSI launched a tender offer to purchase the outstanding shares of Excel
Technology on July 23, 2008 and it is expected to remain open until August 19,
2008. The Company continues to expect that both the US Optics and Excel
Technology transactions will close in the third quarter. For more infomation,
please refer to our recent filings with the Securities and Exchange Comission.
Dial In: July 31st at 8:30 a.m. ET
GSI Group will host a conference call for investors at 8:30 a.m. Eastern time on
July 31, 2008. Participants are invited to join by dialing (706) 634-5123 with
an access code: 57330611. The replay will be available for two weeks by dialing
(706) 645-9291 with the replay passcode: 57330611. The conference call also will
be broadcast live over the Internet at www.gsig.com.
About GSI Group Inc.
GSI Group Inc. supplies precision technology to the global medical, electronics,
and industrial markets and semiconductor systems. GSI Group Inc.'s common shares
are listed on Nasdaq (GSIG).
Forward Looking Information
Certain statements in this news release may constitute forward-looking
statements within the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 27A of the United States Securities Act of 1933 and
Section 21E of the United States Securities Exchange Act of 1934. These
forward-looking statements include, but are not limited to, anticipated
financial performance; management's plans and objectives for achieving more
stable revenues and predictable growth, including as a result of the pending
acquisition of Excel Technology (Excel); business prospects; industry trends;
and market conditions. All statements contained in this news release that do not
relate to matters of historical fact should be considered forward-looking
statements, and are generally identified by words such as "anticipate,"
"believe," "estimate," "expect," "intend," "plan," "objective" and other similar
expressions. Such statements are based on our management's beliefs and
assumptions and on information currently available to our management and are
subject to risks, uncertainties and changes in condition, significance, value
and effect. Some of the risks and uncertainties that may cause actual results
and events to differ materially from those set forth in the forward-looking
statements include the following: our management's ability to maintain or
accurately forecast revenue growth or to anticipate and accurately forecast a
decline in revenue from any of our products or services; our ability to compete
in an intensely competitive market; its ability to develop and introduce new
products or enhancements on schedule and that respond to customer requirements
and rapid technological change; new product introductions and enhancements by
competitors; our ability to select and implement appropriate business models;
plans and strategies and efforts to execute on them; our ability to identify,
hire, train, motivate, and retain highly qualified management/other key
personnel and its ability to manage changes and transitions in management/other
key personnel; the impact of global economic conditions on GSI's business;
unauthorized use or misappropriation of its intellectual property; as well as
the risk factors discussed previously and in periodic reports filed by us with
the SEC or with securities regulatory authorities in Canada.
In addition, to the extent the forward-looking statements assume, or are based
upon, successful completion of the pending acquisition of Excel, such statements
also involve risks and uncertainties that may cause actual results and events to
differ materially from those set forth in the statements, including the
following: (a) the occurrence of any event, change or other circumstance that
could give rise to the termination of our definitive merger agreement with Excel
Technology, Inc. (Excel), including our external financing being unavailable due
to the non-satisfaction of the conditions contained in the financing agreements
or the failure of the investors party thereto to fulfill their obligations
thereunder; the inability to complete the acquisition of Excel due to the
failure to receive required regulatory or other approvals or to satisfy other
conditions to the transaction; the risk that the proposed acquisition disrupts
current plans and operations; the risk that anticipated synergies and
opportunities as a result of the acquisition will not be realized; difficulties
or unanticipated expenses in connection with integrating Excel into GSI; the
risk that the acquisition does not perform as planned, including the risk that
we or Excel will not achieve revenue projections; the risk that the substantial
indebtedness we will incur to finance the acquisition will materially and
adversely affect our business by, among other things, requiring us to apply all
or substantially all of our free cash flow to service the indebtedness and/or to
dispose of assets to obtain cash for other permitted uses; the inability to
retain key employees of either company; and changes in either company's business
between now and the closing of the acquisition.
Readers should not place undue reliance on any such forward-looking statements,
which speak only as of the date they are made. Management and GSI disclaim any
obligation to publicly update or revise any such statement to reflect any change
in its expectations or in events, conditions, or circumstances on which any such
statements may be based, or that may affect the likelihood that actual results
and events will differ from those contained in the forward-looking statements.
GSI GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. GAAP and in thousands of U.S. dollars, except share amounts)
June 27, 2008 December 31, 2007
------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $183,271 $171,714
Accounts receivable, 57,945 73,527
less allowance of $374
(December 31, 2007 -- $372)
Income taxes receivable 13,594 12,241
Inventories 62,640 65,522
Deferred tax assets 8,264 8,249
Other current assets 8,830 7,394
-------- --------
Total current assets 334,544 338,647
Property, plant and equipment,
net of accumulated
depreciation of $24,877
(December 31, 2007 -- $32,263) 42,401 30,817
Deferred tax assets 9,904 9,887
Other assets 821 713
Long-term investments 997 854
Intangible assets, net
of amortization of $9,713
(December 31, 2007 -- $8,603) 11,722 12,817
Patents and acquired technology,
net of amortization of $42,307
(December 31, 2007 --$40,122) 17,881 20,054
Goodwill 26,421 26,421
-------- --------
Total Assets $444,691 $440,210
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 15,683 $17,504
Income taxes payable 1,365 1,411
Accrued compensation and benefits 8,848 10,369
Deferred
revenue 10,629 9,949
Deferred tax liabilities 290 286
Other accrued expenses 12,435 9,353
-------- --------
Total current liabilities 49,250 48,872
Deferred compensation 608 676
Deferred tax liabilities 7,589 7,589
Accrued long term restructuring 1,651 938
Income taxes payable 3,261 3,537
Accrued pension liability 4,598 4,481
Deferred rent 2,938 --
-------- --------
Total liabilities 69,895 66,093
Commitments and contingencies
Stockholders' equity
Common shares, no par value;
Authorized shares: unlimited;
Issued and outstanding: 41,607,460
(December 31, 2007-- 42,161,592) 304,569 310,970
Additional paid-in capital 9,712 8,245
Retained earnings 51,530 48,329
Accumulated other
comprehensive income 8,985 6,573
-------- --------
Total stockholders' equity 374,796 374,117
-------- --------
Total Liabilities and
Stock holders' Equity $444,691 $440,210
======== ========
GSI GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. GAAP and in thousands of U.S. dollars, except per share amounts)
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
------------------------------------------------------------
Sales $ 66,010 $ 73,117 $ 137,690 $ 147,321
Cost of goods sold 40,623 43,362 84,976 88,131
--------- --------- --------- ---------
Gross profit 25,387 29,755 52,714 59,190
Operating expenses:
Research and development and engineering 7,475 7,729 15,350 15,386
Selling, general, administrative and other 14,700 14,925 31,017 28,866
Amortization of purchased intangibles 1,601 1,690 3,280 3,419
Restructuring expense (net of benefit) 1,501 1,576 1,184 3,928
--------- --------- --------- ---------
Total operating expenses 25,277 25,920 50,831 51,599
Income from operations 110 3,835 1,883 7,591
Other income 21 47 143 94
Interest income 1,002 1,667 2,167 3,214
Interest expense (18) (24) (36) (81)
Foreign exchange transaction gains (losses) 133 (62) 192 (434)
--------- --------- --------- ---------
Income before income taxes 1,248 5,463 4,349 10,384
Income tax provision (154) (2,140) (1,148) (3,861)
--------- --------- --------- ---------
Net income $ 1,094 $ 3,323 $ 3,201 $ 6,523
========= ========= ========= =========
Net income per common share:
Basic $ 0.03 $ 0.08 $ 0.08 $ 0.15
Diluted $ 0.03 $ 0.08 $ 0.08 $ 0.15
Weighted average common shares outstanding (000's) 41,736 42,427 41,831 42,204
Weighted average common shares outstanding
for diluted net income per
common share (000's) 41,853 42,678 42,112 42,409
GSI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. GAAP and in thousands of U.S. dollars)
Three Months Ended Six Months Ended
------------------------------------------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flows from operating activities:
Net income for the year $ 1,094 $ 3,323 $ 3,201 $ 6,523
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,387 4,202 7,254 8,326
Stock-based compensation 651 693 1,433 1,022
Deferred income taxes 24 (214) (29) (199)
Earnings from equity investment (37) (47) (143) (94)
Unrealized gain on derivatives (195) (460) (181) (407)
Gain on disposal of assets (1,561) -- (1,561) --
Non-cash restructuring charges 558 -- 558 --
Changes in current assets and liabilities:
Accounts receivable 15,413 (11,143) 15,970 (16,250)
Inventories 3,823 (680) 2,953 849
Other current assets (1,761) (173) (1,471) 5,837
Accounts payable, accruals and taxes (receivable) payable 934 10,642 (1,726) 8,469
--------- --------- --------- ---------
Cash provided by operating activities 22,330 6,143 26,258 14,076
Cash flows used in investing activities:
Acquisition of business -- (3,006) -- (3,006)
Proceeds from the sale of property and equipment 3,211 -- 3,211 --
Additions to property, plant and equipment (12,475) (1,495) (16,677) (3,293)
(Increase) decrease in other assets 230 -- (108) --
Increase in other liabilities 3,149 11 3,650 27
--------- --------- --------- ---------
Cash used in investing activities (5,885) (4,490) (9,924) (6,272)
Cash flows provided by (used in) financing activities:
Purchase of treasury shares (3,326) (286) (6,439) (760)
Excess Tax benefit of stock options 15 204 23 258
Issue of share capital (net of issue costs) 20 3,095 38 6,328
--------- --------- --------- ---------
Cash provided by (used in) financing activities (3,291) 3,013 (6,378) 5,826
Effect of exchange rates on cash and cash equivalents (535) 191 1,601 348
--------- --------- --------- ---------
Increase in cash and cash equivalents 12,619 4,857 11,557 13,978
Cash and cash equivalents, beginning of period 170,652 147,436 171,714 138,315
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 183,271 $ 152,293 $ 183,271 $ 152,293
========= ========= ========= =========
GSI GROUP INC.
Consolidated Analysis By Segment (unaudited)
(In thousands of U.S. dollars)
Three Months Ended Six Months Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- ---------- ---------- ----------
Sales:
Precision Technology Business .................................$45,488 $ 46,921 $ 89,523 $ 90,545
Semiconductor Systems Business..................................20,989 27,110 49,756 58,968
Intersegment sales elimination (1)................................(467) (914) (1,589) (2,192)
------- ---------- ---------- ----------
Total..........................................................$66,010 $ 73,117 $ 137,690 $ 147,321
======= ========== ========== ==========
Gross profit %:
Precision Technology Business ....................................39.0% 38.4% 38.7% 37.2%
Semiconductor Systems Business ...................................37.0% 42.4% 36.4 43.1
Intersegment sales elimination....................................20.0% (22.2)% 2.4 (5.1)
Total.............................................................38.5% 40.7% 38.3% 40.2%
(1) Sales of Precision Technology products to Semiconductor segment
Consolidated Sales Analysis By Geographic Region (unaudited)
Three Months Ended
------------------------------------------------
June 27, 2008 June 29, 2007
----------------------- -------------------
Sales % of Total Sales % of Total
----------- ---------- ------- ----------
(In millions) (In millions)
North America $ 27.4 41 % $ 19.2 26%
Latin and South America 0.1
Europe (EMEA) 11.0 17 12.6 17
Japan 12.5 19 15.7 22
Asia-Pacific, other 15.0 23 25.5 35
Total $ 66.0 100 % $ 73.1 100%
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